Let’s Make A Deal: Taxes, Healthcare & The Decisions Ahead James Slotnick, JD AVP, Sun Life Institute NOT FDIC/NCUA INSURED MAY LOSE VALUE NO BANK/CREDIT.

Let’s Make A Deal: Taxes, Healthcare & The Decisions Ahead

James Slotnick, JDAVP, Sun Life Institute

NOT FDIC/NCUA INSURED • MAY LOSE VALUE • NO BANK/CREDIT UNION GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCYNOT FOR USE WITH THE PUBLIC.

Heading Towards “Taxageddon”

Healthcare: Fact & Fiction

Deficit Reduction: Tough Decisions Ahead

3

Taxes

• Income tax rates – 2011 & 2012

– Top rates 33% / 35%

– Dividends/capital gains• 0% if in 10% or 15% bracket

• 15% for everyone else

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

4

Taxes

• Estate Tax Changes– 2011 & 2012

• Full step-up in basis

• 35% top estate tax rate

• Estate tax exemption set at $5 million– Unused exemption becomes portable– Unified with gift tax exemption

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

5

Taxes

• 2013 – “Taxageddon”

• Bush Tax Cuts expire (again)

• Estate Tax reverts to $1 million

• Healthcare taxes kick In

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

6

Taxes

• Healthcare legislation – 2 new tax increases

– Medicare payroll tax• Employee portion increases

– 1.45% up to $250,000

– 2.35% over $250,000

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

7

Taxes

• Healthcare legislation – 2 new tax increases

– Unearned income excise tax• Additional 3.8% tax on unearned income

• Applies to those making more than $250,000

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

8

Taxes

• Health Care Legislation - Medicare Excise Tax– Every $10,000 Capital Gain

• At a 15% Cap Gain Rate – $1,500• 3.8% Additional Tax - $380• Total Tax Due: $1,880

• At a 20% Capital Gain rate - $2,000• 3.8% Additional - $380 • Total Tax Due: $2,380

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

9

Taxes

• Heading Towards “Taxageddon”– 2012 Elections

• All about taxes

– Taxes & Investing• Taxes may play a bigger role in investment decisions

– Municipal bonds– Tax efficient mutual funds– Variable annuities– Life insurance

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

Heading Towards “Taxaggedon”

Healthcare: Fact & Fiction

Deficit Reduction: Tough Decisions Ahead

11

Healthcare Reform

• The Individual Mandate– Fines for not having health insurance

• Potential exemptions based on income

– Beginning in 2014 fines will be greater of:• % of income• Flat dollar amount

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

12

Healthcare Reform

• The Individual Mandate– Employers Under 50 Employees

• No penalty for not offering coverage

– Employers Over 50 Employees• Penalty for not offering coverage or affordable

coverage

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

13

Healthcare Reform

• The W2 Issue- 2012

- W-2 will include employer paid health insurance

- Not taxable to employee

- Future taxation?

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

Heading Towards “Taxaggedon”

Healthcare: Fact & Fiction

Deficit Reduction: Tough Decisions Ahead

15

Deficit Reduction

• Budget Control Act

– Immediate Spending Cuts

– Immediate Increase of the Debt Ceiling

– Creation of the Joint Select Committee

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

16

Deficit Reduction

• Joint Selection Committee• 12 Member Committee

– 6 House / 6 Senate

• Must create $1.2 Trillion in budget cuts

– House / Senate cannot change their bill

– If rejected automatic $1.2 Trillion in cuts

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

17

Summary

– Taxes• Be on the lookout for 2013

– Health Care Reform• More questions than answers

– Deficit Reduction • Uncertain times ahead

FOR FINANCIAL PROFFESIONAL USE ONLY, NOT FOR USE WITH THE PUBLIC

18

Next steps

Learn more about how our Advanced Markets Group can help

your clients.

Call us at 866-637-5348, Option 2

Ask for our Advanced Markets Group

James Slotnick, JD

617-273-2141; [email protected]

19

Thank you

All withdrawals of taxable amounts, including earnings, are taxable as ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal tax penalty. Withdrawals may also be subject to surrender charges if they exceed the annual free withdrawal amount, and may reduce the contract values, death benefits, and any living benefits.

Your clients should consider the investment objectives, risks, charges, and expenses of a variable annuity. For this and other important information, request a prospectus from the sales desk. Please read both the variable annuity product and the variable investment option prospectuses carefully before investing or sending money for clients.

Sun Life Financial, its distributors, and its respective representatives do not provide tax, accounting, or legal advice. Any tax statements contained herein are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Clients should consult their own independent advisors about any tax, accounting, or legal statements made herein.

Sun Life Financial Masters variable annuities are issued by Sun Life Assurance Company of Canada (U.S.) (Wellesley Hills, MA) in all states except New York. In New York, the contracts are issued by Sun Life Insurance and Annuity Company of New York (New York, NY). Variable products are distributed through Sun Life Financial Distributors, Inc. All three companies are members of the Sun Life Financial group of companies.

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